Jack Dorsey, the former CEO of Twitter, recently stated in response to a comment on June 6th that Ethereum (ETH), the second-largest cryptocurrency exchange in the world, is a security under US law. Dorsey’s claim implies that ETH holders should comply with the rules enforced by the Securities and Exchange Commission (SEC).
Dorsey, a well-known bitcoin supporter and CEO of Square Inc, a financial services company that owns Cash App, has been an outspoken advocate for the underlying technology of BTC. He believes that bitcoin can change the way money is exchanged and can help create a more equitable financial system. Square is already invested in bitcoin, and Cash App continues to process billions of dollars worth of BTC transactions.
Officials from the SEC and Commodity Futures Trading Commission (CFTC) have previously said that BTC, the home currency of the bitcoin network, is a commodity and not an investment contract. However, Dorsey’s statement comes at a time when ETH is threatened with regulatory storm from several directions.
SEC Chairman Gary Gensler recently stated during a congressional hearing in early February that tokens like Ethereum are sold as investments and generate profits solely through the efforts of others, making it an investment contract or security subject to federal securities laws. However, he added that the commission is reviewing the cryptocurrency markets, including Bitcoin and Ethereum, to ensure they are efficient and fair.
While Gensler did not clarify whether ETH is a security or commodity during his appearance before the House Financial Services Committee in mid-April, the SEC has taken enforcement action against several companies that mint tokens on the Ethereum platform. Leading influencers have also been accused by the SEC of promoting tokens that they claim are registered securities.
As the regulatory authority has labeled tokens of competing smart-contract platforms such as Cardano and Algorand as securities, Ethereum prices experienced a sell-off on June 5th but have since made up their losses. ETH remains sensitive to regulatory developments, and the bulls have not been able to break the high of $2,100 in 2023. The SEC has yet to issue an official statement on the classification of this cryptocurrency, but it could decide not to regulate ETH as a security after reviewing all relevant factors.